Australian Housing Market Report
If you’re a homeowner in Australia or planning to become one soon, you should be keeping an eye on the state of the housing market. It’s important to pay attention so that you can take advantage of opportunities to buy or sell a home.
However, with so much uncertainty in this already-complicated sector of the economy, it’s difficult to get your bearings. This article will help give you a better sense of where the housing market in Australia stands today and where it is headed.
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Current state of Australian housing market
There is no way around it: the property market in Australia has been experiencing a downswing in the last few months. The pandemic saw massive spikes in real estate prices, as well as general inflation across the board. To combat the inflation, the Reserve Bank of Australia (RBA) has increased interest rates four times since May 2022.
This makes it more expensive to take out home loans, which has cooled the property market. Steeper interest rates and slow economic growth have also reduced investor demand for property purchases. Home investors are seeing worse economic returns than before.
The bottom line from this is that property prices in Australia have come down substantially, particularly in major metropolitan areas, and are likely to keep falling. One major positive impact from this is that houses become more affordable for prospective homebuyers. But by that same token, sellers are worried about not getting a good sale price, so they’re taking their assets off the market.
Many economists see the current downturn as a market correction from the extreme price climb between 2020 and 2022.
What’s next for property prices in Australia
Most leaders in the housing sector agree that prices will continue to drop in the coming months. This is due to a sustained economic slowdown and persistent inflation. Notably, a recently published Freedom of Information request for RBA documents revealed that some in the bank are expecting a 20% decrease in home prices. Many other experts are also forecasting a price decline of around 15-20% until the end of 2023. This will especially be true if interest rates remain high.
Importantly, major cities are likely to experience the brunt of these price swings, since they were also the epicentre of the price jumps during the previous two years. Sydney property prices and Melbourne property prices are expected to continue dropping, with house prices in Perth on a similar downswing.
There are also a few key bright spots for the housing market that should not be overlooked. Unemployment remains low, and wages are still rising. This helps maintain some demand for property. Nevertheless, sluggish economic growth paired with slow population growth suggests that demand will remain moderately low for some time.
To address these issues, the federal government has announced multiple different programs aimed at stabilising the housing market. Shared equity schemes and stamp duty concessions for first time buyers have been designed to make home ownership more accessible. At the same time, new lending restrictions have been introduced for investors.
Major banks’ house prices predictions for capital cities
A huge number of Australians do business with the big four banks in Australia: ANZ, CBA, NAB, and Westpac. These banks’ public predictions reveal a lot about their outlook as the country forges ahead in an uncertain housing market.
| Bank | Peak-to-trough prediction | Sydney prediction | Melbourne prediction |
|---|---|---|---|
| ANZ | -18% | -8% | -9% |
| CBA | -15% | -18% | -15% |
| NAB | -20% | -9% | -14% |
| Westpac | -16% | -8% | -10% |
As major banks weigh the economic future, interest rates begin to play a major role. Sharp swings in the housing market always illuminate the pros and cons for both fixed rate home loans and variable rate home loans.
Property prices in Australian state capitals
Sydney Property Prices
As the most expensive housing market in Australia, Sydney attracts a lot of attention from housing market trackers. Home values here jumped nearly 25% during the pandemic, but have since fallen almost 14% and are expected to fall another 6% in 2023. The constrained geographical nature of the city indicates continued high prices for the foreseeable future.
Melbourne Property Prices
Another major metropolitan area, Melbourne has also seen large price shifts in its housing market. Home prices here are projected to come down 6% in 2023 after already coming down 11% in 2022. Melbourne remains substantially more affordable than Sydney, even in spite of its population growth outpacing other capital cities.
Brisbane Property Prices
As the third largest metro area in Australia, Brisbane sees its fair share of competition in the housing market, but it remains more affordable than Sydney and Melbourne. Property prices in Brisbane are forecasted to drop 12% in 2023 after remaining mostly level in 2022. Population growth stemming from interstate migration is expected to help sustain housing demand in the area.
Perth Property Prices
A massive population centre on the West Coast, Perth has not been immune to the housing price hikes. Home prices in Perth are projected to drop 12% in 2023 after being fairly level in 2022. Perth is also a competitive rental market and has relatively low housing supply, which affects property prices as well. The Real Estate Institute of Western Australia has continued to track strong sales in this region.
Adelaide Property Prices
This city on the southern coast has enjoyed a comparatively strong housing market throughout the turbulence of the past few years. House prices in Adelaide rose 4% in 2022, but as the market corrects, there is an expected price drop of 17% for 2023. This will definitely be one of the property markets to keep an eye on in the coming years.
Canberra Property Prices
The nation’s capital experienced a massive price hike in its housing market during the pandemic, with a 38% jump. Since then, home prices in Canberra have fallen 7% in 2022 and are expected to fall another 9% in 2023. With more international travel returning in coming months, demand is expected to swell, although it will be primarily concentrated on flats rather than entire stand-alone houses.
Darwin Property Prices
As one of the smaller capital cities in Australia, Darwin hosts an attractive housing market for those looking to escape more crowded areas. Property prices in Darwin were steady in 2022 but are predicted to fall 12% in 2023. As more and more employers offer remote work options post-pandemic, Darwin could see further population growth and housing demand.
Hobart Property Prices
One of the smaller and more remote state capitals in Australia, Hobart has seen fairly high housing prices in the past few years. However, these prices are likely to drop around 9% in 2023 after already having fallen 8% in 2022. Its island location has not discouraged Australians from seeking residence in this city, and it will remain a dynamic housing market in the coming years.
Other factors affecting the property market
The country’s housing market is subject to several dynamic and competing forces that can each affect the supply and demand of homes. As economic tides rise and fall, home prices can change drastically. Below are some of the principal factors that can affect property prices in Australia:
Interest rates: If interest rates return to lower levels, borrowing money will be cheaper, which makes it easier for more buyers to enter the marketplace.
Economic growth: When jobs are plentiful and incomes are high, more people will look to buy new homes, which can push up prices.
Government policy: Tax breaks, stamp duty concessions, or other incentives and subsidies can encourage more people to buy a home.
Location changes: If certain cities grow and thrive more than others, homes there will become more desirable and their markets will grow competitive.
Population growth: As Australia gains new residents from a combination of births and international migration, buyer competition will increase.
Demographic changes: Longer life expectancy and lower marriage rates can lead to an ageing population and more single-person households.
Australian housing market FAQ
Big picture view for the Australian property market
The housing market is complex and has millions of moving pieces, but the general atmosphere in Australia right now is a state of post-pandemic recovery. Prices are beginning to correct themselves after huge spikes during COVID-19.
While rent remains steep due to high competition for rental units, property prices are almost universally expected to keep coming down nationwide. This is great news for prospective buyers. Meanwhile, sellers should be conscious of the trajectory of their property’s value in the coming months and years.